Mexico Might Need More Airbus MRO Capacity

Mexicana is an authorized Airbus repair station that works on Airbus A320s and A330s, while also supporting Boeing 737s and 767s and Fokker 100s.

Mexicana

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Mexican aviation is expanding steadily. AeroMexico passenger counts are up 20% from a year ago, and two low-cost carriers (LCC) are expanding rapidly. The country already has a substantial middle-class travel market that will only get bigger.

But some are worried that the domestic maintenance infrastructure is too limited. Two major LCCs fly or will fly Airbus aircraft, and local resources for heavy checks on these are limited or qualified by financial uncertainty. The largest independent maintenance facility, that of grounded Mexicana, is tied up in bankruptcy proceedings. Although management expresses confidence in its capabilities, potential customers are less confident.

AeroMexico and Delta Air Lines have just opened a very large MRO, but it will apparently be devoted mostly to the owners’ aircraft, at least for a while. And TechOps Mexico, as it is called, only supports Boeing and Embraer models.

Mexican carriers can continue to scrape by, but they would like better options: more choices and firmer choices. And both airlines and MROs say Mexico is ideal for maintaining aircraft from all over the Americas. It has lower labor costs than its northern neighbors and could build the facilities to attract South American carriers as well.

For example, VivaAerobus’s current fleet of 19 Boeing 737s will be phased out over the next two to three years, but the narrowbodies will continue to require heavy maintenance. The carrier is now transitioning to the Airbus A320 family, using leased A320s (AW&ST, March 3, p. 17). Two of these already are in Monterrey undergoing regulatory review, and the remainder will arrive later in 2014 and early 2015. In all, VivaAerobus has ordered 52 new A320s and A320neos for delivery from 2015 to 2021.

VivaAerobus calls itself an ultra-low-cost carrier. The airline seeks to grow by partnering with strategic suppliers, according to CEO Juan Carlos Zuazua. “We are always keen to find good-quality MROs and regulator-approved shops that can deliver cost saving, good turnaround times and quality workmanship,” Zuazua stresses. The airline will rarely perform its own maintenance in-house, so it wants to support development of good MROs in the region.

But Zuazua says Mexico’s maintenance infrastructure is still very limited. “There is only one MRO, Mexicana, capable of supporting 737s and A320s.” Because the parent Mexicana corporation is in bankruptcy, working with the Mexicana MRO unit is risky, at least in the eyes of VivaAerobus’s board of directors.

Zuazua believes Mexico has the resources, including talented aviation technicians, to justify investment in three to four strategic MROs around Mexico. He argues that these could serve not only Mexico’s growing aviation needs but also Central and South American carriers looking for quality maintenance at low cost within reasonable distances of their bases.

And he would like to see robust maintenance infrastructure. “Heavy maintenance facilities would be the number-one priority,” Zuazua says. “However, to provide enhanced competition and quality, smaller specialty and support shops like those for avionics, batteries, wheels and brakes, tires, and so forth are also required.”

All this should be possible, Zuazua believes, because Mexico offers a favorable business climate. “Local governments are eager to get specialized aviation-maintenance investors to look at Mexico. The federal government has been anxious to see its growing domestic airlines supported by an infrastructure of Mexico-based MROs.”

Finally, the market is very healthy. Zuazua says Mexico has more new and leased aircraft coming in the next decade than any other Central or South American country. Many non-Mexican airlines already transit Mexico, so they could move aircraft in and out of heavy checks there. Locations should be available; there are 60 well-equipped airports in Mexico.

Mexico’s major independent MRO believes it has the capabilities now. “We are the largest and best-equipped MRO in Latin America by far,” stresses Adolfo Crespo y Vivo, senior vice president of customer service at Mexicana’s maintenance organization.

Mexicana’s hangars and shops already are certified by FAA, EASA and aviation authorities in Argentina, Brazil, Chile, Ecuador and Peru, in addition to Mexico. Mexicana is an authorized Airbus repair station that works on A320s and A330s, while also supporting Boeing 737s and 767s and Fokker 100s.

And it is busy. In late February 2013, Mexicana has 21 aircraft going through C and D checks or other work such as installation of winglets on Lan Chile’s 767s. “We do maintenance on the entire Lan Chile fleet,” Crespo y Vivo stresses. “And we do TAM’s A330s.”

In Mexico City, the MRO has one large hangar sufficient for five aircraft, plus a painting hangar—so it has room for six check lines. An idle Mexicana facility in Guadalajara has room for two more lines. Mexicana does not overhaul engines but does work on components. It employs 1,500 mechanics.

The MRO is currently involved in the equivalent of a Chapter-11 bankruptcy reorganization with the Mexican government and airline creditors. If no new investment is made to restart airline operations, the maintenance unit will be sold to help pay off creditors.

Crespo y Vivo says that whether or not Mexicana airline is revived, the MRO would still work for other airlines. Unlike its parent, the maintenance unit is profitable, albeit “with a very small margin.”

VivaAerobus could be one potential customer, the Mexicana executive says, noting that his shops have in the past performed maintenance for both Volaris and AeroMexico when they were competitors. The MRO also has worked for non-Mexican airlines such as the entire Latam group, Avianca, Air Jamaica and “just about every lessor.”

Mexicana’s attractions include being a one-stop shop for checks, components and painting; competitive costs; high quality, and a central location in the Americas.

Others are also eager to support Mexican aviation growth. QET Tech Aerospace in the western state of Sonora performs heavy maintenance with case-by-case approvals from the Mexican civil aviation authority. It has applied for and is waiting for approval for heavy maintenance on A320s, 737s, Bombardier CRJs and Embraer ERJs. Vice President Technical & Commercial Operations Mike Dornenburg says QET is also waiting for its FAA 145 repair station approval process to start.

Meanwhile, QET has done line maintenance on ERJ 145s in Queretaro, Monterrey and Guadalajara. It also does lease return and aircraft recycling work, plus non-destructive testing and boroscopes.

QET has worked for VivaAerobus, Volaris and AeroMexico, as well as Gecas, Bombardier and Standard Aero, among other customers. But so far it has only done heavy checks on an Estaffeta CRJ200 and on one VivaAerobus 737.

Dornenburg sees QET competing with Mexicana and AeroMexico for heavy maintenance and with the Aviation Integrated Service Group for line maintenance. He says Mexico’s heavy maintenance infrastructure remains underdeveloped, especially given Mexico’s location and many competitive advantages.

QET opened a new hangar at the end of 2013 and is planning to eventually add slots to accommodate five 747s. Dornenburg says these slots could be used for smaller aircraft, depending on the customers QET can attract. The company is now negotiating for facilities in Tijuana and Guadalajara.

Dornenburg says the biggest hurdle to developing QET and Mexican maintenance generally is lack of investment capital. Although the MRO must now seek case-by-case approval for doing C and D checks on Mexican aircraft, he predicts this restraint will be removed in a few more weeks.

Work on U.S. aircraft is also on the horizon. The FAA called QET in February to ask if it was interested in continuing its repair station application. “Of course, we said yes,” Dornenburg stresses. The company has begun to build some fine facilities, but Dornenburg says its strongest attractions are low costs and proximity to the huge U.S. market.

A lot of Mexico’s maintenance planning and investment prospects probably hinge on the future of the country’s newest MRO facility. In early March, Delta Air Lines and the AeroMexico Group opened a joint venture, TechOps Mexico. The partners call it the largest MRO in Latin America. It has hangars for up to nine aircraft. The two airlines invested $55 million in the facility, located in Queretaro.

TechOps Mexico has ample space: 100,000 sq. meters (1.1 million sq. ft.) of surface area and three separate hangars. It will use cutting-edge technology and advanced renewable and clean-energy systems. It even has a rainwater-harvesting system and recycling program.

But the facility will work only on a variety of Boeing models and ERJ 145s. Company sources say it will work chiefly for the owning airlines but will offer third-party checks later in 2014.

It is not clear how much capacity at TechOps Mexico will be available for other airlines. Managers say service capacity will be doubled to 18 or 20 lines in 2016, but have not yet indicated what that capacity will be used for.

A healthy Mexicana, an expanded QET and a bigger TechOps serving many carriers might be just what Mexico needs, while offering foreign carriers some good options, too.